Byrd v. Hamer, 408 Ill. App. 3d 467

Byrds filed administrative review of Illinois Department of Revenue’s determination that their gambling winnings (1999–2002) were Illinois taxable income and that gambling losses were not deductible.
The Department treated winnings as taxable, and losses as non-deductible unless tied to a trade/business activity; Illinois’ tax system piggybacks federal treatment.
The Byrds argued they were professional gamblers ( Groetzinger standard) or, alternatively, recreational gamblers entitled to losses deduction; Illinois Act 203 incorporates some federal deductions but not for casual gambling.
Casinos’ year-end payout records and W-2G forms underpin the amended NODs; the Department later relied on original NODs after deeming some evidence unreliable.
Trial court and Appellate Court upheld the Department’s view that the Byrds were recreational gamblers and not in a trade or business; the Department’s uniformity and due process challenges were rejected.
The court confirms the Department’s decision, holding gambling losses are not deductible for recreational gamblers under Illinois law and that the Byrds’ gambling did not constitute a trade or business.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Byrds’ gambling activity was a trade or business.	Byrds claim Groetzinger standard applies; they gamed regularly with profit motive.	Department held they were recreational gamblers, not operating a trade/business.	Gambling did not meet trade/business criteria; not a trade or business.
Whether recreational gambling losses are deductible.	Loss deduction should be allowed; constitutional challenges otherwise.	Act does not allow recreational gambling losses; follows federal treatment for professional gamblers.	Losses not deductible for recreational gambling.
Whether the Act violates due process on facial or as-applied grounds.	Act is irrational/double taxation; burdensome to recreational gamblers.	Statute rationally distinguishes between hobby and business gambling; no due process violation.	No facial or as-applied due process violation found; rational basis maintained.
Whether equal protection or uniformity challenges invalidate the Act.	classifications between professional vs. recreational gambling and between forms of gambling are unconstitutional.	classifications valid; follow federal model and reporting rules.	Uniformity and equal protection challenges rejected; classifications sustained.

Thorpe v. Mahin, 43 Ill. 2d 36 (1969) (distinct treatment of income earned from a trade or business vs nonbusiness income upheld)
Bodine Electric Co. v. Allphin, 81 Ill. 2d 502 (1960) (Illinois Act carries over federal treatment but not all federal deductions)
In re Marriage of Tegeler, 365 Ill. App. 3d 448 (2006) (income concept applied to gambling winnings under Illinois law)
Winkler v. United States, 230 F.2d 774 (1st Cir. 1956) (recognizes distinctions between professional and casual gambling)
Groetzinger v. Commissioner, 480 U.S. 23 (1987) (set standard for trade or business gambling; continuous/regular income pursuit)